URS ‘B’ Piece Edges Closer As Bonds Await Pricing

Credit Suisse First Boston and Wells
Fargo Bank reportedly are close to filling the $350 million "B"
term loan for San Francisco-based URS Corp. Bankers said the
six-year "B" piece had gained $305 million in commitments as of
this week. The banks are asking for final commitments to be in
before the accompanying $250 million senior note offering is
priced, which is expected to happen later this month, one banker
noted. Officials at the banks either declined to comment or did not
return calls.

Most buysiders and bankers have expressed
positive sentiment on the credit, citing the access to government
contracts as important, especially in the current climate for
defense spending. EG&G provides outsourced engineering,
technology and operations management services to the U.S.
government, which is a tough sector to break into, one banker
noted. "Not only is it difficult to be on the approved list, the
company has a large number of contracts outstanding," he
added.

But there are certain factors weighing on
investors. The heavy purchase price multiple has deterred some
buysiders, while the leverage has others feeling uncomfortable.
Furthermore, contracts are on a revenue-recognition basis, which
means revenue can fluctuate heavily, one investor said. The
performance of the bank debt of competitors, including
Washington Group International, also may drag down on the
credit, one banker noted.

In addition to the "B" piece, the senior bank
debt comprises a five-year, $100 million revolver and a five-year,
$200 million revolver that will be unfunded at close. Pricing on
the "B" loan is LIBOR plus 3 1/2%, while the pro rata is priced at
LIBOR plus 3%. The loan is a part of a $900 million financing
package backing the $500 million acquisition of EG&G
Technical Services from The Carlyle Group (LMW, 7/21).
URS also plans to refinance $354 million of its existing debt.
Calls to David Nelson, treasurer of URS, were not
returned.